Barely a fortnight after agreeing to reform the states power sector to secure a financial package from the Centre, chief minister Akhilesh Yadav seems to have got political jitters, much like his predecessor Mayawati who deferred tariff hikes fearing an electoral setback.
When the UP Power Corporation proposal to raise tariffs by 15-20% for domestic consumers came up for discussion, Yadavs officials informed him about its political impact. Instead of clearing the proposal, Yadav who has already given an in-principle approval to reforms asked chief secretary Jawed Usmani and other officials to study its political implications first. The proposal will go to the state electricity regulator only after the chief ministers clearance.
Mayawati did not allow tariff hikes in the last two years of her tenure to prevent a potential setback in the 2012 elections. Now, with general elections slated for 2014, the incumbents in Lucknow seem to follow the same no-hike philosophy. Its another matter that Mayawati could not retain power despite the populism.
The hikes, if implemented, will affect approximately 65 lakh domestic consumers out of the states 1.3 crore consumers. These consumers have been exempt from any tariff hike for the last three years. (No hike is proposed for industries, who faced hikes up to 40% last year.)
States which want to avail of the central debt recast package must raise tariffs every year to bridge the gap between input cost and revenue realisation. UPPCL desperately needs central funds to pay its debt.
Until March 2012, UPs power sector dues was Rs 30,000 crore, including approximately Rs 15,000 crore due to banks and and an equal amount as outstanding power purchase liabilities.
The tariff revision for UPs domestic consumers was in 2009-10 when the rates were hiked by 20%.
UPPCL has always been a tool for every political dispensation. But if the present government does not take tough steps despite sending its acceptance letter to the Centre, it will be unfortunate as the package may not materialise and the condition of UPPCL may worsen beyond repair, said an official, adding tariff hikes are absolutely necessary.
The average cost of electricity comes to about Rs 6 per unit, while the average revenue realised is around Rs 4. While the cost of electricity has gone up many notches, the hike has not been in tandem, driving the corporation into the red. If we do not rationalise tariff for the domestic sector, we are sure to sink, said another official. If the state government backs out, the bailout package may fall through, as nobody would be willing to give financial guarantee for populist decisions, he said.